However, Zoetis stands to benefit from poodle-pampering pet owners and a wealthier, growing global population more interested in meat and milk. Zoetis is also launching new drugs, expanding in new markets and paying down debt, which will cut costs next year when per-share profit growth is expected to rise 13% from 7% this year.

"The sustainability of Zoetis' earnings growth is underappreciated," wrote Guggenheim Securities analyst Louise Chen in a recent note. "For those with a longer-term investment horizon, patience will be rewarded."

At a Glance

Zoetis (ZTS)

Stock Price:

$30.72

52-Week High:

$33.34

52-Week Low:

$29.14

Market Value:

$15.4 billion

Est. 2015 EPS:

$1.73

2015 P/E:

17.7

Est. Long-Term EPS Growth:*

13%

Est. (2015/2014) EPS Growth:

13.00%

Revenue (trailing 12 months):

$4.5 billion

Dividend Yield:

0.90%

CEO:

Juan Ramón Alaix

Headquarters:

Florham Park, N.J.

*Based on analyst estimates looking ahead three to five years. Sources: Thomson Reuters and Yahoo! Finance

Roughly two-thirds of Zoetis' revenue comes from vaccines and drugs used on livestock. The rest is from companion animals, such as cats and dogs.

Unlike companies that cater to human health care, animal health companies are not beholden to health insurers. A fragmented customer base gives manufactures pricing power. And barriers to entry are high as new product development requires time and money.

With roughly 20% of sales coming from patented products, Zoetis doesn't face the same patent expiration cliff as its former parent. Strong brand names help protect the rest of its revenue stream, as does a diverse product portfolio.

The stock could climb 25% to $38, says T.J. Qatato, an analyst and portfolio manager at Frost Investment Advisors.

"I see a great business and I am willing to pay a bit of a premium for it," says Qatato. "There is opportunity for not just top-line growth, but also faster earnings growth."

Zoetis trades for 20 times estimated 2014 earnings per share and 17.7 times estimated 2015 earnings.

In February, Zoetis predicted 2014 per-share profit of $1.48 to $1.54 on revenue of $4.65 billion to $4.75 billion, falling short of analysts' expectations. Wall Street now expects earnings of $1.54 a share.

Next year, Zoetis is expected to earn $1.73 a share on revenue of almost $5 billion.

However, challenges remain. The U.S. cattle herd has shriveled to its lowest level since the 1950s due to prolonged drought. And the Porcine Epidemic Diarrhea Virus (PEDv) has killed more than 10% of the nation's pig population over the last year.

Also, Zoetis needs to show it can meet rising demand for Apoquel, a canine anti-itch drug the Food and Drug Administration approved last year. The company says the shortage could last until next year.

Still, earnings are expected to rise 13% annually over the next several years.

Zoetis generates roughly $300 million in free cash flow annually, helping it pay down debt and sweeten its dividend, which yields 0.9%.

Rising prices for beef and pork suggest farmers will ensure the heath of their remaining animals. Cattle herds, meanwhile, will be rebuilt over the next few years, helping Zoetis.

In short, we have no bone to pick with Zoetis.

Full Disclosure

• Guggenheim Securities and/or one of its affiliates has had an investment-banking relationship with Zoetis during the last 12 months. The firm intends to seek compensation for investment-banking services from Zoetis in the next three months. The firm has a Buy rating on the stock.

• Frost Investment Advisors held 192,545 shares of Zoetis as of March 31, 2014, according to filings.